Gas spike a sign end is not near

Oh, wait -- actually, many people are happy about it: the commodity speculators who've been helping to drive up prices of oil and other raw materials for the last five months.

Though we curse them at the gas pump, we owe a debt of gratitude to the commodity gamblers. Even before the stock market turned in early March, rising oil prices were signaling faith that the world really wasn't coming to an end.

If you think back to what the U.S. economy and most financial markets looked like in the thick gloom of February, that was a gutsy bet. Somebody had to take a stand and put up some money that civilization would survive.

Once equity markets began to rally in March, they fostered a sense of relief that fed on itself. You don't have to own stocks to feel better that the financial system has avoided total collapse, albeit thanks to massive government cash injections.

Now, with the Standard & Poor's 500 index up sharply from its 12-year low reached on March 9, the question of whether Great Depression II is imminent has receded. Wall Street has gone back to worrying about issues that are more or less evergreen, including rising gasoline prices, our foreign creditors' concerns about the dollar's long-term health, and the recent jump in government bond yields.

The rebound in U.S. stock prices naturally has some investors wondering whether it's time to take some chips off the table. But among market pros, selling at this point might be motivated more by a desire to have money available for opportunities in other assets, such as corporate or municipal bonds, commodities, foreign stocks or even real estate -- and less by a fear-driven need to build a bigger cash cushion in a money market fund paying nearly undetectable annualized yields.

Yet for the economy, the overriding theme remains that things are merely less bad, not good.

New claims for unemployment benefits have fallen from their highs, but the number of people drawing jobless benefits has repeatedly set records, reflecting the dearth of employment possibilities for those who've been laid off.

Retail sales rose 0.5 percent in May after declining in March and April, but escalating gasoline prices boosted the total spent last month.

The Federal Reserve's latest report on regional economic trends showed that five of the Fed's 12 district banks described activity as "stable or little changed in recent weeks." But the gist of the report was that business and consumer activity remained very weak.

A much less ambiguous sign of progress for the financial system was the Treasury's approval of 10 major banks' requests to repay the capital infusions they received under the Troubled Asset Relief Program.

For the economy to eventually return to some semblance of normality, the government will need to extract itself from many of the places it has gone in the name of staving off a worse catastrophe.

Of course, that idea will seem laughable to people who believe the Obama administration is socialist at heart. But the White House at least sounded the right notes recently. "The president's program at this point appears to be having many of its intended effects," Lawrence Summers, President Barack Obama's chief economic adviser, said recently at the Council on Foreign Relations in New York.

"What is crucial and where our focus has been as we have intervened when necessary, is on the intervention being temporary, based on market principles and minimally intrusive," Summers said.

The Obama administration no doubt received a wake-up call from the action in the Treasury bond market in recent weeks. Some investors, no longer worried about an economic meltdown but instead focusing on the potential inflationary effects down the road from soaring government spending, pushed longer-term Treasury yields significantly higher. Rising T-bond yields have pushed up mortgage rates and have made some of our foreign creditors jittery. What's more, government bond yields also have rebounded in other developed nations.

The fear is that higher interest rates could quickly halt any economic recovery. So too could a continuing jump in oil prices.